1. Field of the Invention
The invention relates to the field of debt obligations and more particularly to collateralized debt obligations.
2. Description of the Related Art
Various forms of Collateralized Debt Obligation (CDO) structures are known. For example, Asset-Managed CDOs can provide a tool for clients to invest in a tranche of a managed portfolio, but they lack the flexibility that some clients desire. Traditional CDO transactions have a pre-defined ramp-up period and closing date which must be observed. This can cause a lack of flexibility with respect to execution timing. Traditional CDO transactions offer certain tranches in the form of swaps and other tranches in the form of notes. This can cause a lack of flexibility with respect to the format. The counterparty for clients of a traditional CDO is normally an SPV. This can cause a lack of flexibility with respect to the counterparty. Traditional CDO transactions are predefined and, once structured, provide little flexibility with respect to individual investors' transaction size wishes. This can cause a lack of flexibility with respect to transaction size. The transactions resulting out of a traditional CDO are normally pre-defined and there is little possibility to accommodate client's needs and risk/return preferences. This can cause a lack of flexibility with respect to structuring.
One existing structure is CDO tranching based on a syndication approach. In this approach, the CDO is typically managed by an asset manager on behalf of an investor. However, the structure is somewhat inflexible in terms of format, size, exact risk/return profile, structure and execution timeline.
Another existing structure is Customized Equity, CLIP and Mezzanine tranche. In this approach, each deal is tailor-made. However, the deal is based on a portfolio that is not managed by an outside asset manager. Instead, the portfolio is either static or lightly managed by the investor himself.
Because the known CDO structures lack either certain flexibility for client/investor needs, or do not provide portfolio management, what is needed is a system and method that provides greater flexibility and also provides for enhanced portfolio management.
The preceding description is not to be construed as an admission that any of the description is prior art relative to the present invention.